Fed to Begin Interest Rates Hike in March
The market reacts as the United States Federal Reserve signals intention to raise interest rates from March. Oil prices surge again and heading higher further amidst the ongoing Russia-Ukraine war.
In the stock market, U.S equity benchmarks rose with government bond yields following the recent sell-off, and crude oil surged past the $110 mark as Russia expanded its assault on Ukraine ahead of the second round of conciliatory talks.
Stocks also rose as Federal Reserve Chair Jerome Powell signalled the central bank remains on track to begin raising interest rates this month. Read: Russia’s Invasion Rattles Financial Markets, Assets Swing
The Dow Jones Industrial Average climbed 1.8% to 33,889.65, with the S&P 500 up 1.8% to 4,383.40, and the Nasdaq Composite 1.3% higher at 13,707.67. All three indices sold off after the invasion of Ukraine.
Energy and financials led the gainers, with all sectors in the green by early Wednesday afternoon. West Texas Intermediate crude oil advanced $4.92 to $108.33 a barrel. It touched $112.51 earlier in the trading session, its highest level in about a decade.
The US 10-year yield jumped ten basis points to 1.84%. Gold dropped by $23.05 to $1,921.20 per troy ounce, retreating from its highest level seen on Tuesday since Nov. 2020.
IEA Strategic Oil Reserve Release Failed to Quell Market Sentiment
The International Energy Agency’s announcement of a 60-million-barrel release from strategic oil reserves did not have a price-dampening effect as the quantity would only cover two weeks’ worth of Russian shipments, Commerzbank said in a Wednesday note.
the sentiment was also dampened by the IEA chief executive’s statement describing the energy market situation as very serious and saying that global energy security is under threat, the bank noted.
The market is increasingly pricing in an outage of Russian oil shipments and more Western oil companies are withdrawing from Russia, along with shipping companies no longer accepting transport contracts from or to Russia, Commerzbank said. Russian oil is seeing buying interest evaporate as a result.
In addition, the discount on the Russian oil type Urals vis-a-vis Brent climbed to more than $18 per barrel on the physical market on Tuesday, which has not been seen since the collapse of the Soviet Union, according to the bank.
But even at this massive discount, oil traders were apparently unable to find any willing buyers. #Fed to Begin Interest Rates Hike in March
